What’s poppin’ — the Indian government has decided to own 35.8% of India’s No.3 telecom provider, Vodafone Idea, in exchange for the $6.76 billon in fees the company owed GOI.
To remind ya, VI had been gasping for breath for several years now — bleeding cash and subscribers ever since Jio shocked the telco market with its merciless price wars.
Meanwhile, VI continued to rake up dues with the government (most of which comes from an arrangement where VI should pay a small portion of its revenues to GOI, for using public spectrum).
Anyway, with the cash to equity swap, GOI now becomes the largest shareholder in VI. Vodafone’s ownership will be diluted down to 28.5%. OG-owners Aditya Birla Group will own 17.8%. Rest will be owned by the public and other investors.
The move drew mixed reactions, obviously. Free market loyalists didn’t like GOI’s meddling, particularly when it's beating the drum on selling government owned corporations elsewhere. Also, the history of blatant mismanagement with BSNL?
However, letting Vodafone crash? And leave India’s fledging, upcoming internet market to the mercy of a ruthless Duopoly (Jio and Airtel)? Nah.
Dalal Street tried to flee the scene though, dragging VI stock down 20% on their way out.
Big picture — money-wise, this is the best shot VI could get to clean up its act. But… it could also end up much worse, turning into a messy giant lacking the agility needed to succeed in free markets. We'll see!